Two costly car insurance questions

Terry JacksonWhen most of us have to tap our auto insurance, the issues are usually simple: How soon can I get the car fixed? What's my deductible? Will my rates now go up?

But in the age of CARFAX (where potential buyers can discover that your car was seriously damaged three years ago in a wreck) and increased efforts by insurers to limit their losses, two rare but important issues may come into play: diminished value and betterment.

Diminished value is an argument that once a car has been in a crash and been repaired, its value to the owner has diminished when compared to an identical vehicle that has never been damaged.

For example, a 2003 Honda Accord that sustained significant crash damage but was repaired to serviceable condition -- both visually and mechanically -- may be worth less at trade-in or sales time than an accident-free Accord with similar mileage.

The argument is that even though the damaged Accord was repaired and returned to reliable service, the insurance company owes the owner compensation for the car's diminished value. This compensation could range from several hundred to several thousand dollars.

In the past, owners of expensive and rare vehicles typically have pursued such claims. These cars are much more prone to scrutiny from potential buyers than the average used car.

But increasingly, savvy owners of less prestigious cars are pressing the idea of diminished value with their insurance companies.

Understandably, the first response from most insurers is to deny such claims. Some policies may have language that precludes the claims altogether. But it's still worthwhile for a consumer whose vehicle has been severely damaged to at least explore this avenue.

On the flip side, some insurance companies try to recoup money from customers by claiming vehicle "betterment." This occurs when vehicles have been repaired to a condition that's allegedly better than before an accident or incident.

A colleague ran into this several years ago when her car stalled out in a flooded intersection and water got into the engine block.

Her insurance company paid to have the engine rebuilt, but then sent her a bill for about $400 for "betterment" after the adjuster found that prior to the flooding, the engine was clogged with oil sludge. The insurance company argued that the freshly rebuilt engine increased the value of the car.

More common incidents of betterment involve fresh repaints of an entire car that, before the crash, had faded paint or many minor dings in the bodywork.

The good news for consumers is that such betterment charges are not automatic and can be challenged through arbitration under the terms of the policy.


But it's always worthwhile to look beyond immediate insurance concerns when your car has been in a wreck to see what else may be at stake. 

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